2008-07-18 Cost-Shifting Relief Requests are Preventive

Failure to Raise Cost Shifting Issue in Timely Fashion Results in Denial of Motion

In a decision from the Eastern District of Michigan [Cason-Merenda v. Detroit Medical Center, 2008 WL 2714239 (E.D.Mich. 2008)] defendant Detroit Medical Center moved the court for an order requiring the plaintiff to pay for third party vendor costs in connection with ESI production. Magistrate Judge Scheer issued this decision, denying the motion to shift costs, and in a rather strongly worded opinion, puts out the message that requests to shift costs must be made in a timely fashion, or be denied.

Relevant Rule:

The Court began with a recitation of relevant excerpts from Fed. R. Civ. P. 26:

"Fed. R. Civ. P. 26(b)2(B) provides as follows: A party need not provide discovery of electronically stored information from sources that the party identifies as not reasonably accessible because of undue burden or cost. On motion to compel discovery or for a protective order, the party from whom discovery is sought must show that the information is not reasonably accessible because of undue burden or cost. If that showing is made, the court may nonetheless order discovery from such sources if the requesting party shows good cause, considering the limitations of Rule 26(b)2(C). The court may specify conditions for the discovery.

The parties did undertake a Rule 26(f) meet and confer, issue a proposed joint ESI Order, and that Order was in fact signed by the Court:

"In this action, the parties entered a Stipulated Order for Discovery of Electronically Stored Information, which was adopted by the court on June 20, 2007. The Order notes that the parties held several discussions regarding the possibility of limiting the scope and extent of discovery and that future agreements might be reached. They also reserved the right to petition the court to limit the scope and burden of discovery and to request that the opposing party share the costs."

The issue raised before the Court involved the reservation of rights provision, permitting either party to petition the court to limit the scope and burden of discovery, and request cost sharing presented the issue to the court.

So how did defendant run afoul of both the Rule 26 and their discovery Order, and in effect waive their rights to request cost shifting to plaintiff? Defendants Motion failed for two reasons; the first relating to the discovery order itself, and the second having its basis in Fed. R. Civ. P. Rule 26(b)2(b) and 26(c):

Here, the defendant apparently engaged a third party ESI vendor to produce the relevant requested ESI, paid for same, and then decided to seek costs. It did not object to the request, nor did it file a motion for a protective order seeking relief by way of cost shifting or cost sharing.

The Court determined that the procedure for asserting a cost shifting or sharing claim is identical to the assertion of any other objection to a request for production. In other words, a disagreement about cost shifting is a discovery dispute, and should have been handled in the same way as any other discovery dispute. The ESI discovery Order in this case specifically provided that any all motions to compel discovery were required to be discovery be filed within 14 days of a party's "receipt of notice of such disputed discovery" Defendant here failed to so file, and the Court deemed the filing of the motion to shift costs untimely as a first basis for denial of that motion.

The second basis for the Court's denial of the motion for cost shifting focused on an interpretation of Fed. R. Civ. P. Rule 26 and relevant decisional authority on cost-shifting that in essence requires an assertion of cost-shifting to be made prior to the what the Court termed defendant's choice at "self-martyr[dom], i.e., the undertaking of, and incurring costs of production first, and seeking redress for costs after such undertaking.

"[Defendant] DMC surely was, or should have been, aware of the substantial cost of responding to Plaintiffs' discovery requests before it undertook to do so. Rather than raising the issue of undue burden and cost before they were incurred, when there would have been an opportunity for the court to demand a showing of good cause by the requesting party, explore alternatives, impose conditions or otherwise encourage compromise, DMC elected to suffer the expense and only then seek contribution from the Plaintiffs."

The relevant decisional authority supporting the proposition that a motion for cost-shifting or sharing be made (by way of a motion for protective order, etc.) before the discovery is undertaken will be familiar to eDiscovery aficionados:

"The federal rules contemplate that discovery will proceed without judicial intervention unless a party moves for a protective order or an order compelling discovery. Oppenheimer Fund, Inc. v. Sanders, 437 U.S. 340, 98 S.Ct. 2380, 57 L.Ed.2d 253 (1978). Ordinarily, a party must bear the expense of complying with discovery requests, although he may invoke the district court's discretion to grant orders protecting him from undue burden or expense, including orders conditioning discovery upon cost shifting. Id., at 358. There is authority that “[a] court should consider cost shifting only when electronic data is relatively inaccessible, such as in back up tapes.” Zubulake v. U.B.S. Warburg LLC, 217 F.R.D. 309, 324 (S.D.N.Y.2003). Thus, to the extent that DMC maintains that the information produced by it in discovery was accessible, court ordered cost shifting is inappropriate."

The Court also noted that by not acting in a timely fashion, the defendant actually deprived the Court of the ability to decide a priori, from a variety of relief options it might have imposed:
"The clear import of the language employed is that the court has wide discretion to prevent undue burden or expense. But for Defendant's delay, the court would have been in a position to select from a range of alternative actions:

In [the Court's], the provisions of that rule simply underscore the untimeliness of the instant motion. The rule provides, in pertinent part, that “[t]he court may, for good cause, issue an order to protect a party or person from ... undue burden or expense, including one or more of the following:
(A) Forbidding the disclosure or discovery;
(B) Specifying terms, including time and place, for the disclosure or discovery;
(C) Prescribing a discovery method other than the one selected by the party seeking discovery;
(D) Forbidding inquiry into certain matters, or limiting the scope of disclosure or discovery to certain matters;Fed.R.Civ.P. 26(c)(1)."

In addition, had the court determined to impose conditions upon DMC's production, Plaintiffs presumably would have been in a position to elect either (a) to accept the conditions or (b) to forego the discovery and save DMC the burden and expense of producing it. Unfortunately, DMC's tardy filing has deprived this court of its most valuable prerogatives. Having elected to martyr itself rather than to seek relief in a timely fashion, DMC seeks an order imposing the cost of its choice upon its opponents. I find neither substantive merit nor equity in its request."

Takeaway: Cost-shifting or cost-sharing are by definition discovery disputes, and accordingly, requests relief must be by way of appropriate preventive (perhaps even preemptive) procedure (i.e., a motion for a protective order, or a response to a motion to compel). Oh, and don't be a martyr.